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Find the solutions you need by accessing our extensive portfolio of information, analytics and expertise. The IHS Markit team of subject matter experts, analysts and consultants offers the actionable intelligence you need to make informed decisions.

2015 Technology Surprises Countdown - 20 to 16

16 Dec 2015Dale Ford

Once again, the past year brought many surprises to the technology industry as innovation, competition and market twists and turns kept everybody on their toes. IHS Technology analysts on the Thought Leaders Council created a list of 56 notable surprises in 2015 and voted on them to identify and rank the top 30 technology industry surprises of 2015. IHS Technology will post five surprises each day this week in a countdown to the number one surprise of 2015. In the previous two days, numbers 30 to 26 and 25-21 were published. Today numbers 20 to 16 are presented. Enjoy!

#20 Foundry Manufacturers Accelerate Technology Development

Rapid technology innovation is resulting in a more limited number of companies able to keep pace with the investments and Capex required. The semiconductor industry grows through diversified innovation. Companies traditionally develop technology and are able to profit from their innovation. These profits are then injected back into the industry resulting in the development of the next generation of technology. With the recent rapid technology development cycles the number of companies that are able to recover investments in R&D and capital is declining. Ultimately this will limit the number of long-term participants.

Monopolies within the semiconductor industry, no matter how efficient, will limit creative ideas. In an industry that thrives on innovation, the more diversity the lower the ultimate cost the consumer will pay and the greater the number and speed of innovative products that will enter the market. The rapid transition of technology has already impacted entire regions. As manufacturing becomes more centralized the potential implications on regional economies could ultimate result in serious economic limitations and potentially regional recessions.

Intel and Micron have surprised the semiconductor world with the fruit of their combined effort by unveiling a new type of non-volatile memory called 3D XPoint. The 3D XPoint is the industry-first storage memory that encompasses the best features of both DRAM and NAND flash, with 1,000 times the speed and endurance of current NAND flash technology, while also being ten times denser and less costly than DRAM.

All these quantum leap improvements are only possible thanks to the use of stackable transistor-less memory cell design and the adoption of novel materials for holding the states of the memory. In addition to all these superior advantages, the 3D XPoint memory is also affordable to manufacture by using current process node and manufacturing technologies without the need for new investments in fabs.

Although this new memory design breakthrough will have wide ranging implications on the industry, this doesn't mean it will immediately disrupt the memory and storage market and gain commercial success. There are still other existing proven technologies in the market, such as 3D NAND flash and 3D DRAM that are yet to hit the end of their technological lifecycle. The industry will let these technologies run their course while developing and testing out new solutions such as the 3D XPoint in the market.

When it's eventually released in the market, the 3D XPoint memory will primarily target next-generation applications that require a completely new levels of hardware performance such as VR gaming, in-memory databases for big data analytics, high-fidelity pattern recognition, and machine learning.

After many years of trial and error, virtual reality technology has finally caught up with the requirements of speed and spatial recognition to convincingly trick the human brain into feeling 'presence' somewhere else. The technology required for VR - high-resolution small screens, high-powered local processing, cheap cameras and 3D rendering engines have all been developed to a very high standard in the mobile phone, IT and gaming industies, enabling VR to be not only compelling, but affordable.

As with many of our most forward-thinking technologies, VR is being actively developed by the internet giants, including Facebook Oculus and Google Cardboard, with hardware companies like HTC, Samsung and Sony heavily involved. However, VR is a complex new media and is likely to be something different and new, more akin to the development of television than the development of 4K. Technically, VR requires a new ecosystem VR including headsets, processing devices (either phones or consoles at the moment), and content which has to be created using either live action 360 degree video camera rigs, or CGI content typically generated inside a 3D games engine. The experiences from VR however, are likely to be 'experiences' more than films, and probably less active than most current games. For the content industry, VR might be the closest thing to creating a completely new medium since computer games were invented.

The hype around the Internet of Things (IoT) has grown steadily over the past five years, with market growth estimates accelerating at a rapid pace. In 2010, five-year forecasts for IoT started at 20 billion devices, then over the past few years jumped to 50 billion and even 1 trillion devices. While consumer markets were expected to account for roughly half this growth, a significant portion was predicted to come from "Industrial IoT".

What we finally saw start to happen in 2015 was a much needed dose of reality, with a number of large, vocal industry proponents of IoT pushing back their forecasts, with Cisco & Ericsson being particularly notable. IHS believes that this is actually a very positive development for the market, as it acknowledges the fact that IoT represents a fundamental change in the way we use technology. The potential benefits of IoT are significant, but it is important to recognize that there are no easy answers for the inherent complexity, cost and security/privacy concerns with many market segments. The industrial market in particular presents some unique challenges, specifically extremely long replacements cycles for industrial automation equipment, challenging industrial communications environment (fragmented, proprietary), and cultural challenges leading to push back from IT at IT-led initiatives. IHS still believes that the transition to Industrial IoT will happen, but a more realistic timeframe is 10-15 years.

That is not to say that there are no near-term developments expected for IoT. On the contrary, IHS predicts that 2016 and 2017 will be extremely important in the development of standards and security models, in addition to further refinement of key technologies including low-power processors, wireless connectivity and sensors. This activity will be critical to establishing a solid foundation for IoT, as well as driving future growth, albeit at a more moderate pace.

TV advertising has been prematurely pronounced dead several times, and its death has always been postponed. Supported by the past, the TV industry thought that the rise of online video consumption and new video streaming would be a long-term threat evolving as a glacial change. Short-term, business would continue as it is. Yet since the end of 2014, TV advertising in the US stumbled into an abrupt and accelerating decline as online video consumption and advertising monetization accelerated.

The weak US quarterly earnings throughout 2015 have fueled the narrative that TV advertising is heading into a structural crisis. In their filings, television companies quote the erosion of linear viewing and the rise of OTT consumption as key factors for declining net advertising revenues (NAR). Headlines of a 'media implosion' or a 'media industry meltdown' argue that we have reached peak TV advertising.

TV viewing declines and migration to online consumption have been the trigger term associated with weak advertising performance. But our analysis of SEC filings and conversations suggests that the viewing decline has been overstated in the public interpretation of the quarterly earnings. It is one among many variables that affected advertising performance. Our financial analysis demonstrate that 83% of the revenue decline in US TV advertising in 2015 was due to cyclical, strategic and exchange rate factors. Only 17% of decline could be attributed to structural audience erosion. In contrast to public debate, the quarterly earnings do not support a categorical change in outlook, and are not evidence that a systematic demise of TV advertising has begun. The main factors impacting TV advertising growth remain media event cycles (sports, politics), programming strategy, and exposure to currency fluctuations. Online remains a threat to TV advertising budgets mid- and long-term, but TV operators have taken extensive steps to build out comprehensive audiovisual ecosystems across acquisitions in content and advertising technology to ensure that advertising money moving online can be absorbed by their own online offerings.